REP. GREG WALDEN (R-OR): Thank you very much, Mr. Chairman. I appreciate the fact-the work of the staff on this issue and certainly your leadership on this issue, and recognize the problem that is before us. I spent several years on a community hospital board, a nonprofit hospital board, before coming to the Congress. And every month we'd go through our billing and every month we'd write off a goodly share for charity care. And I recall that the biggest shifter of costs, if that's the right word, in the system was both Medicaid and then Medicare. That often we had reimbursement rates that, frankly, didn't necessarily cover even the costs of care. And so those are issues I think we need to look at. Clearly the billing issue, though, is a legitimate one that needs to be examined and I know many of the hospitals have begun to do that, many were in the process of doing that and certainly the light that's been shed on this practice has moved that effort forward.

It is interesting to note, however, that when it comes to the uninsured there are some folks that probably do have the ability to pay. And I got the Census data. It's kind of interesting to note that of those who went without health insurance for an entire year, 8.2 percent had household income in excess of $75,000 and 20 percent had household income over $50,000. Interesting, too, as we look at how do you get healthcare coverage, especially insurance, for folks, who are these folks? And in some cases obviously 20 percent of household income over $50,000. 43.3 percent are non-citizens of the United States according to Census population studies. 33.4 percent are foreign born. So you get 76-77 percent are either foreign born or not citizens of the United States who are uninsured. So as we look at how do we reach out to provide affordable healthcare, there is clearly a target group there that stands out in certain need. I know we work with those folks in many different ways.

I think this hearing is important. I think looking at the Charge Master and what people are being billed and whether or not that's reasonable charges is very important for this subcommittee. And so I look forward to the testimony of the various folks from the various panels, and hopefully together we can find a more equitable way to make all this work and still allow hospitals to be able to keep their doors open and provide care, including the enormous charity care that's already given.

Mr. Chairman, thank you for your leadership and I look forward to the witnesses.

BREAK IN TRANSCRIPTREP. WALDEN: Thank you very much, Mr. Chairman.

I want to go to a comment you made, Dr. Collins, regarding insurance and the $1,000 deductible portion. Because I'll tell you what I hear, having been a small employer for 18 years now, and we provide insurance for employees, health insurance, that as I talk to employers in my district and around, it's the price, the premium that's driving them away from providing insurance.

The annual increases, sometimes 30, 40 percent. And they're having to make some really difficult and unwanted choices. And with the advent of the health savings accounts, I'm finding renewed interest and new availability of policies where you could actually insure a family for catastrophic care at, say, $300 a month. Now, albeit the deductible can be high, but the employer can contribute to that, which then goes into the HSA.

And they're saying, you know, gee, maybe I can continue to provide health insurance for a while longer. Some are adding it for the first time. And I'm wondering, in terms of your studies and others on the panel, do you look at that and what that means? Because if I'm a moderate to low income person and my small employer, which is where most of us work and get our insurance, if they're able to continue to insure their preventing a catastrophic loss. Because when you have the heart attack and you're on the gurney, you're not negotiating price at the door of the hospital, and maybe the only hospital in 20 miles.

So do you look at those data? As well, would the loss be higher if you're uninsured than if you have a catastrophic stop loss?

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REP. WALDEN: Right. But it seems to me, if I've got, let's say, a $1,000 deductible HSA policy, health savings account policy. I'm out $1,000 upfront, certainly. I may be out some form of a co- payment, and I don't know what that would be, 80, 20, 90, whatever to a stop loss period. But once I'm out that, then I'm covered, right? So my heart attack that may be $11,000, I'm paying $1,000. Without any insurance I'm getting hit for not $11,000 but $30,000, according to Dr. Anderson, which is outrageous.

So I'm looking at this, and I've worked on these issues as an employer, on a small community hospital board and the state legislature. I chaired the committees after my first session that implemented the Oregon health plan and expanded the high risk pool and did all these things to try-I haven't found a silver bullet yet that solves this problem. But what I find is there are a bunch of little things you can do that fit different pieces, and we try and get more people covered.

And so I look at HSAs and say, maybe this is one piece that works for a certain segment that can insure the uninsured that otherwise would be walking away from the table today, and are.

MS. COLLINS: Yeah, the concern of course is whether or not people have a comprehensive benefit package that leaves them covered when they need it, it gives them good access to the healthcare system, and not underinsured. And whether or not there are other options for small employers buying into large groups, pools, for example, that we --

REP. WALDEN: Right, which I've supported.

MS. COLLINS: That might provide more affordable care for their employees.

DR. ANDERSON: When people have first dollar coverage, the things that they don't do are preventive services. So the women do not get mammograms, they do not get pap smears, because they can defer those things till the next year and the year after that. So those were the things when we have this lack of first dollar coverage, are the things that we go without. I mean, that's just --

REP. WALDEN: But if your alternative is you have no coverage, how are you any better-I mean, how --

REP. WALDEN: Sure. And that was the whole idea behind the Oregon health plan, which for the Medicaid population said, we can immunize or do preventive work for thousands where we can do one high risk procedure for an 80, 90 year old that wanted a liver transplant, is an alcoholic, diabetic, whatever.

DR. ANDERSON: And that's what the health savings accounts will still pay for.

REP. WALDEN: Right.

DR. ANDERSON: And so, you know --

REP. WALDEN: I understand that, but there is a certain amount of personal responsibility when it comes to healthcare, and people do make decisions about whether or not they have satellite TV and a new car. And I mean, there are other financial decisions, I'm sure you see it in your bankruptcy work, don't it. Half of it's medical, certainly, and those are those out of the blue charges like you're saying, $30,000 that shouldn't be $30,000.

But there are other-and I guess that's what I wrestled with on the hospital board, because we'd look at the list of people who owed us money, and as community leaders we knew some of them. And you'd say, wait a minute, I just saw them buy a new whatever and they're driving in town or they're at a business or something, and they should pay and they should be held accountable.

DR. ANDERSON: But if they're being asked to pay $30,000 for something you know everybody else is buying for $10,000 --

REP. WALDEN: I don't disagree with that. But the issue too is, don't those who are insured, don't the insurance companies bring some efficiencies to the hospital? I mean, just like in a-well, in theory Medicare does but I think it just brings more regulation and cost, frankly. But in theory there is an advantage to having a third party payer handle that, whether you're a doctor or a hospital, right?

So I mean, I can see a reason to be able to negotiate-have to have some room to negotiate some reductions for that opportunity, right?

DR. ANDERSON: Sure. And the savings occur mostly in the billing and administrative side, they don't-once you get on the surgical table it doesn't matter who is insuring you.

REP. WALDEN: And it seems to me that part of the problem with this market is, I look again at my district. I've got 20 counties, three of whom don't have doctors or hospitals, and you drive 100 or 150 miles to the first one, literally. And so if you walk in with chest pains, you're not going to say, well, I'm going to go the Dells (ph), it's 19 miles away and I can get it for $100 less. So it isn't really a market process where you can negotiate that kind of price.

DR. ANDERSON: Certainly if you've just had a heart attack.

REP. WALDEN: Yeah. Now, there are, if you're doing cosmetic surgery or something, our colleague Greg Ganske used to talk about people got three prices before they came and made their decision. You look at LASIK eye surgery and things, it's advertised based on price. And I'm not sure I want the cheapest one, but it's a voluntary choice in that case. And what you're looking at is emergency care and others.

DR. ANDERSON: Correct.

REP. WALDEN: But it does it make sense to in effect get into a price setting, say, 25 percent above Medicare. Does that work everywhere, and is that-what are they collecting now off the charge master?

DR. ANDERSON: Most of them are collecting very little off the charge master.

REP. WALDEN: So it raises the issue, why do we have a charge master?

DR. ANDERSON: Exactly. Well, we had a charge master from 1900 on because people originally paid charges. And then 1960, 1965 and even 1990, the charge master meant something. After about 1990 the charge master has no market forces that determine it at all, it's just raised two, three times faster than healthcare costs have risen.

REP. WALDEN: How much of that is because of cost shift from lower-like Medicare and Medicaid that don't always pay the full freight. And how much of that is just those final folks left have no negotiator?

DR. ANDERSON: I would say that it's mostly that those final folks have no negotiator.

REP. WALDEN: And it seems to me too on debt, and maybe, Ms. Jacoby, you can address this, that as a small business owner, when I have a client that is behind 30, 60, 90 days, I'm much better off to sit down and cut a deal because I'm never going to see anything. Even if I go through bankruptcy, the opportunity to collect is pretty slim.

BREAK IN TRANSCRIPT

REP. WALDEN: Okay, then where in the process do you make this work? If I'm negotiating-I'm in the radio business, so I can negotiate a sales price when we go in the door and out the other side and all that. But if I'm a patient coming in to the hospital with need of emergency care, I don't want to wait around, I want somebody to look at me. Where do you make this thing work? Where should these hospitals make it fit?BREAK IN TRANSCRIPT

REP. WALDEN: That's a different issue. One final point, because the census data I had here somewhere indicated that I think the figure, it was 43 percent -- 43.3 percent of those who have no insurance for an entire year are not citizens of the United States. That means-and we saw it in our hospital, we have a very high Hispanic population, a lot of them are not legal citizens of the United States.

How do we cope with that? Because they are not going to want to give data. And you know why. I mean, they don't want a free ride back to their country where they are citizens.

MS. JACOBY: Even those who are citizens may not have the data that are necessary in order to process their charitable care eligibility, in terms of pay scales and the like. If that's what you're referring to, some of the paperwork --

REP. WALDEN: Well, but when you're talking about signing up for charity care in this environment, okay, some of them won't, but-well, then that means they're probably not paying taxes, because you could always turn in a copy of your tax return, I would think. So is that-I mean, where do you help the hospitals here who are saying, okay, I do have a charity program but you've got to work with me, I mean, you've got to give me some data here.

How do we address-what do you recommend? You're the certified smart lawyer here, I'm not.

I'm curious as you all work on getting payment situations set up for those who owe you money, do any of those folks end up getting a loan from a financial institution to pay you? Do you see that happening? Do they go to the bank or their credit union and get a loan-take out a loan so they can pay you? Anybody could take that?

MR. TERSIGNI: I don't know that.

REP. WALDEN: You don't know?

MR. LOFTON: I'm not aware of any specific cases.

MR. TERSIGNI: Do not know.

REP. WALDEN: So that's not what-you're not seeing any of that sort of activity. Is that --

MR. : Don't know.

REP. WALDEN: Don't know, all right. I'm just curious because if they went-it would seem to me if they went to a financial institution to get a loan to pay you back, that financial institution would probably require that loan to be secured by some asset, right? I mean, I was on a bank board for five years. You don't make un- creditworthy loans on purpose and so I wonder how all that works.

Let me go to the Charge Master issue. Now that you all have taken a second look at your charity care, your billing and collection processes-and we've heard a lot today about Charge Master rates being significantly higher than those rates actually paid for by third party payers, insurance companies, Medicaid, Medicare. What have you done, if anything, to change and lower your Charge Master rates? Have you adjusted your Charge Master rates downward? And if so, by how much?

BREAK IN TRANSCRIPT

REP. WALDEN: Mr. Lofton?BREAK IN TRANSCRIPT

REP. WALDEN: But do the HUD guidelines take-does that have anything to do with how you set your Charge Master rates?

MR. LOFTON: No, no. We have not adjusted the Charge Master.

REP. WALDEN: Okay, that's my --

MR. LOFTON: What we've done from the charity care side is to see that we can qualify more patients and then --

REP. WALDEN: Sure.

MR. LOFTON: -- provide them discounts from the Charge Master.

MR. BOVENDER: There are really two issues associated with this Charge Master problem.

REP. WALDEN: Okay.

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REP. WALDEN: I see.

MR. BOVENDER: -- even on the-not just on the uninsured --

REP. WALDEN: But on --

MR. BOVENDER: -- but on the issue on how we negotiate managed care.

REP. WALDEN: Okay, good to know.

Doctor?

BREAK IN TRANSCRIPT

REP. WALDEN: Okay. But if the other hospitals in the area had Charge Master rates that were high-I mean, we've heard testimony in the prior panel that in some cases you've got a $10,000 charge here, an 11 here, but if you're the private pay you're 30,000. If that's the situation among all the hospitals, does that really change anything? If yours is 30,000 and theirs is 29 and-you know what I'm saying?

DR. PARDES: Yeah, I understand. We found that we were somewhat lower actually in charges than many of the other areas. We found also that our cost-to-charge ratio in our urban setting is lower than about 28 -- the urban settings in 28 other states.

REP. WALDEN: All right. Maybe I'll ask this question differently. How much different is your Charge Master rate for a given procedure compared to what you charge your managed care plans, your fee for service plans, Medicare and Medicaid? What is that relationship? (Phone rings.) I'll get it. No, just kidding.

(Laughter.)

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REP. WALDEN: Well, one of-the prior witness, whose name escapes me at the moment, suggested that the Charge Master rate should be Medicare plus 25 percent, which seems sort of arbitrary to me. But I guess that's what I'm trying to get at is what's your Charge Master rate compared to Medicare? Is Medicare plus 25 percent far more than your Charge Master rate for private pays? Or is 25 percent a pretty good deal?

MR. BOVENDER: Well, in our case I can tell you that 25 percent is significantly below our managed care-overall average managed care rate, so it would put it significantly below what we're negotiating with managed care.

MR. BOVENDER: I think the theory that he is putting forward is good. The price point, at least in our case, based upon what Medicare is paying us related to our total all end charges is well below what the rate would need to be to make that happen.

REP. WALDEN: You see what I'm trying to get at here, though? I mean, I-being in the radio business, we sell advertising-I can set a rate at, you know, whatever per commercial but that doesn't mean I get it. And yet in your situation it's a little different because my clients don't have to walk in my door half dead and have to have a radio ad. You know, it would be easier to sell, but -- (laughter) -- collections could still be a problem. But in your case that literally is what happened and they can't negotiate that price and that's why we're having this hearing is to say is this system working? Is it broken? It sure seems like there are some problems and you're addressing some of them, and I think we've all given you credit for that. But what is that differential between Charge Master and actual cost of delivering the service? What is the right price point? Medicare plus 40 percent? Is that even a realistic way to do it?

MR. BOVENDER: Well, it would be a realistic way, but I think a better way was the second suggestion which is peg the price for the uninsured and do it on possibly a DRG rate or a case rate, a diagnosis rate, but peg it to a percentage of your average managed care contract either in a specific market or nationwide. And as I said, we're looking at a price point somewhere around the 95th percentile of all of our managed care contracting. You've got to be careful in setting that because obviously any managed care provider above that is going to want --

REP. WALDEN: What about --

MR. BOVENDER: -- at least as good as what the uninsured is getting.

REP. WALDEN: They're going to tell you --

MR. BOVENDER: (Cross talk) --

REP. WALDEN: -- that minus 3 percent?

MR. BOVENDER: -- pricing in this-well, it sounds easy to say, well, just fix your Charge Master. It has to be fixed for the uninsured, which it needs to be done. But it has to be fixed also taking into account that we've got 5,000 managed care contracts to renegotiate over the next year to two years.

REP. WALDEN: I understand that.

Anybody else want to comment on this? Yes, sir, Mr. Lofton.

MR. LOFTON: And that approach makes a lot more sense because it will allow the rate to be market specific and it will be on a market rate tied to something that's realistic, as opposed to picking numbers out of the air. And because when you have managed care contracts, as Jack said, then they don't want someone else coming in paying much lower than what they would be paying. So it would allow for whatever the market rate is in a given community. It would be tied to what is the customary rate being paid.

REP. WALDEN: Okay. What about in communities-do you have-you don't always have managed care contracts, though, in all communities, do you? In the really rural communities isn't there a lack of managed care in some cases?

MR. LOFTON: For the most part the word is generally used from a more generic standpoint.

REP. WALDEN: Okay, than traditional-okay. All right.

Because I guess the reason I'm trying to probe and get at the bottom of this is there's enough pressure build up that if you all don't figure it out, I'm afraid we will in a way that may not work and that isn't good for the delivery of healthcare in my community or anywhere else. But it's also hard for us to go back and say, sorry, you don't have insurance and you're going to pay three times the amount and they're going to take your house. I mean, you're correct in some of those. But I appreciate your comments and I've used up my time.